On August 10, Alibaba Group released its first financial report after its split. For the second quarter of 2023, Alibaba's entertainment division, encompassing Youku, Alibaba Pictures, and Damai, reported a swing from a loss to a profit, with revenues reaching 53.81 billion yuan, a year-on-year increase of 36%. The adjusted net profit stood at 63 million yuan, a marked recovery from a net loss of 907 million yuan in the same quarter of the previous year.
The company attributed the revenue growth mainly to the expansion of its online entertainment business and a robust revival of its offline entertainment segment. The improvement in net profits was notably driven by increased revenues from Alibaba Pictures and Damai.
Specifically, Youku's membership revenues grew by 5% year-over-year in the second quarter, largely influenced by an increase in average revenue per user and premium original content. Among the TV dramas broadcast on the platform during this period, "Chang Yue Jin Ming" topped the viewership ratings. Data from the Lighthouse Professional Edition indicated that during its broadcast, the drama commanded nearly 30% of the total online viewing market share.
The positive performance of Youku played a significant role in reversing the overall losses for Alibaba's entertainment division. When compared to previously released data from iQiyi, it's evident that long-format platforms have maintained industry leadership. With annual content costs hovering around 200 billion yuan, years of massive investments resulted in substantial scaled losses. However, data from Alibaba's entertainment division for the fiscal year 2023 shows an adjusted EBITA loss of 18.74 billion yuan, down from 46.90 billion yuan in the previous year. This over 60% year-on-year reduction in losses, driven by Youku, underscores its impact on the division's performance.
The offline performance market experienced a robust first half of the year, with Q2 outperforming Q1. As an industry leader, Damai naturally benefited from the market's recovery. According to the China Performance Industry Association, during the second quarter of 2023, there were about 124,400 commercial performances (excluding entertainment venue performances) nationwide, generating box office revenues of 118.13 billion yuan. The number of shows was nearly double that of the first quarter, with revenues surpassing double, underscoring the strength of the revival.
However, Damai faced public scrutiny, mainly due to the supply-demand imbalance for celebrity concert tickets. On June 26, Beijing Damai Cultural Media Development Co., Ltd. was fined 5,000 yuan by the Zhongshan City Culture, Broadcasting and Tourism Bureau for selling performance tickets without approval, and the illicit earnings of 4776.6 yuan were confiscated. The subsequent ticket releases in July and August for Jay Chou's Tianjin concert and TFBOYS' 10th-anniversary concert brought intensified concerns from users over ticket availability, transparency in ticket sales, and ticket scalping.
Alibaba Pictures has consistently reported adjusted EBITA profits for three consecutive fiscal years. In the first half of this year, the company participated in producing or distributing movies like "Bao Ni Ping An" and "Ling Ya's Journey", among others. Summer releases included "The Disappearing Her", "Thirty Thousand Miles of Chang'an", "Octagon Cage", and "Sharp-Tongued Lawyer", with "The Disappearing Her" amassing a box office of over 3.5 billion yuan and "Thirty Thousand Miles of Chang'an" and "Octagon Cage" raking in 1.6 billion and 2.1 billion yuan respectively.
Looking ahead, Alibaba Pictures has a lineup of movies in the pipeline including "Bu Xu Ci Xing", "Ex-4: Married Young", and "Priceless Treasure". On the series front, its in-house studios have been gradually increasing production. Past releases such as "Chi Dao", "Ignite Me, Warm You", and "Door to Rebirth" have seen successful runs on Youku. Upcoming in-house productions include "Surgery Live", "Racing Life", "Fifth Fortune", and "City of Dance".
